International Investment Law and the Public Law Analogy: The Fallacies of the General Principles Method

I NTERNATIONAL I ^NVESTMENT L AW AND THE P ^UBLIC L ^AW A ^NALOGY : T ^HE F ALLACIES OF THE G ^ENERAL P ^RINCIPLES

M ^ETHOD

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Over the past ten years, commentators have drawn an analogy between the international investment regime and domestic public law in order to fill gaps, resolve ambiguities, and understand the nature of the investment regime. One way in which domestic public law may be relevant is if it reflects a general principle of law that is applicable by virtue of Article 31(3)(c) of the Vienna Convention on the Law of Treaties. The practice of international investment tribunals demonstrates, however, that tribunals do not use domestic law according to the ‘general principles method’. Instead, investment tribunals’ use of comparative law raises various normative and methodological issues that have not yet been thoroughly addressed in the literature. The article identifies and addresses some of those issues.

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The relative novelty of the international investment regime has led authors to draw analogies with a range of other systems, from international commercial arbitration¹ to human rights law,² in order to respond to the host of theoretical and practical challenges the regime poses.³ Of these analogies, perhaps the most interesting is the parallel drawn with domestic public law.⁴ Advocates of the analogy argue that investment disputes are “regulatory dispute[s] arising between

1 See eg Pope & Talbot Inc. v. Canada (Merits, Phase 2) (10 April 2001) para. 79. See further, Charles Brower, ‘W(h)ither International Commercial Arbitration’, (2008) 24 Arbitration International 181; Walter Mattli, ‘Private Justice in a Global Economy: From Litigation to Arbitration’, (2001) 55 International Organization 919.

2 See eg Mondev International Ltd v. United States of America, ICSID Case No. ARB(AF)/99/2, Award (11 October 2002) paras 143-44. See further, Gus Van Harten, Investment Treaty Arbitration and Public Law (OUP 2008) 136-43; Valentina Vadi, Analogies in International Investment Arbitration (CUP 2016) 217-19.

3 See generally, Anthea Roberts, ‘Clash of the Paradigms: Actors and Analogies Shaping the Investment Treaty System’, (2013) 107 American J Int L 45. Cf. Martins Paparinskis, ‘Analogies and Other Regimes of International Law’, in Zachary Douglas, Joost Pauwelyn & Jorge E. Vinuales (eds), The Foundations of International Investment Law:

Bringing Theory into Practice (OUP 2014).

4 David Schneiderman, Constitutionalizing Economic Globalization: Investment Rules and Democracy’s Promise (CUP 2008);

Stephan W Schill (ed), International Investment Law and Comparative Public Law (OUP 2010); Santiago Montt, State Liability in Investment Treaty Arbitration: Global Constitutional and Administrative Law in the BIT Generation (Hart 2012); Van Harten (n 2).

the state (acting in a public capacity) and an individual who is subject to the exercise of public authority by the state”⁵ in much the same way as public and administrative law disputes relate to the exercise of public authority in domestic legal systems.⁶ They argue that this functional similarity means that it is beneficial to look to domestic public law to fill gaps, resolve ambiguities, or understand the nature of the international investment regime.⁷

One of the ways to operationalise the public law analogy is through treaty interpretation.⁸ Arbitrators could draw on comparative surveys of domestic public and administrative law in order to guide the interpretation of the vague provisions and broad standards that are invariably incorporated in investment treaties.⁹ Proponents argue that the benefits of drawing on comparative public law in this way are manifold: it would enable the investment law regime to benefit from the experience that domestic legal systems have in dealing with analogous legal issues,¹⁰ restrain arbitrators’ discretion in interpreting treaties,¹¹ and enhance the perceived legitimacy of investment arbitration.¹² Yet, despite enjoying growing support in academia and in practice,¹³ the use of comparative public law to interpret investment treaties has been criticised on both methodological and practical grounds.¹⁴

This article argues that much of the debate regarding the use of comparative public law to interpret investment treaties is to a certain extent based on a false premise. One of the central strands of argument adduced in favour of such comparative reasoning is that domestic law is relevant insofar as it reflects a general principle of law that is applicable by virtue of Article 31(3)(c) of the Vienna Convention on the Law of Treaties (VCLT).¹⁵ Practice, however, demonstrates that

5 Gus Van Harten and Martin Loughlin, ‘Investment Treaty Arbitration as a Species of Global Administrative Law’, (2006) 17 European J Int L 121, 148.

6 See Stephan W Schill, ‘International Investment Law and Comparative Public Law – An Introduction’, in Schill (ed.) (n 4) 17; Roberts (n 3) 64-65 (distinguishing between the public action and public interest theories of international investment law).

7 Roberts (n 3) 46.

8 eg Stephan W Schill, ‘The Sixth Path: Reforming Investment Law from Within’, (2014) 11 Transnational Dispute Management.

9 Schill, ‘Introduction’ (n 6) 36

10 ibid.

11 Montt (n 4) 343-44.

12 Vadi (n 2) 241.

13 International Thunderbird Gaming Corporation v The United Mexican States, UNCITRAL, Separate Opinion of Thomas Wälde (1 December 2005) para 13; Noble Ventures, Inc. v Romania, ICSID Case No. ARB/01/11, Award (12 October 2005) para 178; Joseph Charles Lemire v Ukraine, ICSID Case No. ARB/06/18, Decision on Jurisdiction and Liability (14 January 2010) para 506; Total S.A. v The Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability (27 December 2010) paras 111, 129; Toto Costruzioni Generali S.p.A. v The Republic of Lebanon, ICSID Case No. ARB/07/12, Award (7 June 2012) para 166; Occidental Petroleum Corporation and Occidental Exploration and Production Company v The Republic of Ecuador, ICSID Case No. ARB/06/11, Award (5 October 2012) para 403; Gold Reserve Inc. v Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1, Award (22 September 2014) para 576.

14 José E Alvarez, ‘Is Investor-State Arbitration ‘Public’?’, (2016) 7 J Intl Dispute Settlement 534; see also José E Alvarez, ‘‘Beware: Boundary Crossings’ – A Critical Appraisal of Public Law Approaches to International Investment Law’, (2016) 17 J World Investment and Trade 171.

15 Vienna Convention on the Law of Treaties, 23 May 1969, 1155 UNTS 331.

domestic law is commonly used by courts and tribunals as an interpretative aid outside the framework of Article 31 VCLT and outside the formal sources of law enumerated in Article 38 of the Statute of the International Court of Justice (ICJ). Investment tribunals that have drawn on domestic law have done so not because it embodies a general principle of law, but rather because it constitutes a “benchmark” against which investment protection is to be assessed,¹⁶ or provides the “background” for the interpretation of a provision,¹⁷ or because it demonstrates the fairness of a regulatory measure.¹⁸ Indeed, similar uses of domestic law play a role in the reasoning of other international courts and tribunals, particularly in the domains of human rights law and international criminal law. The existing literature fails to address squarely the normative and methodological issues that are raised by the tribunals’ actual use of comparative law.

This article is composed of five sections. Section II traces the development of the public law analogy and the debate surrounding the use of comparative public law in the literature, highlighting the centrality of the ‘general principles method’. Section III examines the awards of international investment tribunals in order to demonstrate that comparative law has been used either as a means of substantiating a treaty standard, such as the obligation to accord fair and equitable treatment (FET) to investors, or as confirmation for a conclusion made on other grounds. Section IV notes the similarities between the uses of comparative law identified in the preceding section and the practice of the European Court of Human Rights (ECtHR), the International Criminal Tribunal for the former Yugoslavia (ICTY), and domestic courts’ use of foreign law. Drawing such parallels highlights the complex normative, methodological, and evaluative considerations that are raised by investment tribunals’ use of comparative law. Section V concludes by suggesting that investment lawyers need to step outside of the framework of the VCLT in order to understand and account for the current and future use of comparative law in investment treaty interpretation.

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The interpretation of the broad standards and vague provisions that are commonplace in international investment agreements (IIAs) is an issue that is of a relatively recent vintage. Whilst

16 Toto Costruzioni Generali S.p.A. v The Republic of Lebanon, ICSID Case No. ARB/07/12, Award (7 June 2012) para 193.

17 Occidental Petroleum Corporation and Occidental Exploration and Production Company v The Republic of Ecuador, ICSID Case No. ARB/06/11, Award (5 October 2012) para 404.

18 Joseph Charles Lemire v Ukraine, ICSID Case No. ARB/06/18, Decision on Jurisdiction and Liability (14 January 2010) para 506.

IIAs were concluded at a moderate pace for the three decades following the first bilateral investment treaty in 1959,¹⁹ it was not until the mid-1980s that the pace of treaty-making picked up significantly, culminating in the creation of a network of over 3,300 IIAs that exist today.²⁰ As the number of IIAs increased, so too did the number of investment disputes that could make use of the dispute settlement mechanisms contained in those treaties. The first known example of international investment arbitration was initiated in 1987²¹ and since then a total of 855 arbitral awards have been initiated, with over 50 new arbitrations initiated each year for the past five years.²²

The increased activity of the investment law regime put into sharp relief the legal issues that the nascent regime faced. Systemically, increased recourse to investor-state dispute settlement (ISDS) led to questions about the legitimacy of the system, particularly regarding the neutrality and accountability of arbitrators.²³ However, the increased use of arbitration also raised more specific procedural and substantive questions that had until then not arisen. Should, for example, a State that prevails in arbitration have to bear its own costs, or should the losing claimant investor be ordered to cover the respondent State’s costs?²⁴ What standard should be used to determine whether a measure is ‘necessary’ to protect the state’s essential security interests or to maintain public order?²⁵ Should amicus curiae briefs be admitted by investment tribunals?²⁶ It was in response to these systemic, procedural, and interpretative challenges that commentators and tribunals drew analogies with other legal regimes as a way to conceptualise and to develop international investment law. One way in which they did so was by drawing an analogy with domestic public law.²⁷

Roberts identifies two rationales for drawing a parallel between international investment law and public law.²⁸ The first, termed the ‘public action theory’, draws on the traditional idea,

19 Zachary Elkins et al., ‘Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960-2000’, (2006) 60 International Organization 811, 815.

20 UNCTAD, World Investment Report 2016, xii.

21 Asian Agricultural Products Ltd. (AAPL) v. Republic of Sri Lanka, ICSID Case No. ARB 87/3, 27 June 1990.

22 UNCTAD, Investment Dispute Settlement Navigator, available at http://investmentpolicyhub.unctad.org/ISDS.

Accessed 19 June 2018. Note that this dataset includes only information about investment arbitrations that are public.

23 See for example Van Harten (n 2), 167-75. For a recent elaboration of these criticisms in the context of the European Union’s on-going Multilateral Investment Court project, see European Commission Staff Working Document Impact Assessment, ‘Multilateral reform of investment dispute resolution’, 13 September 2017, 11-15.

24 eg ADC Affiliate Ltd. v. Republic of Hungary, ICSID Case no. ARB/03/16, Award (2 October 2006), para 532.

25 eg Enron Creditors Recovery Corp. & Ponderosa Assets L.P. v. Argentine Republic, ICSID Case no. ARB/01/3 (22 May 2007) paras 322-45; CMS Gas Transmission Co. v. Argentine Republic, ICSID Case no. ARB/01/8 (12 May 2005) paras 353-78. Cf. Continental Casualty Co. v. Argentine Republic, ICSID Case no. ARB/03/9 (5 September 2008) paras 189-230.

26 Aguas del Tunari SA v. The Republic of Bolivia, ICSID Case no. ARB/03/02 (21 October 2005) paras 15-18. Cf. Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case no. ARB/03/19, Order In Response To A Petition By Five Non-Governmental Organizations For Permission To Make An Amicus Curiae Submission (12 February 2007).

27 Roberts (n 3) 46.

28 Roberts (n 3) 64-65. Cf Alvarez, ‘Is Investor-State Arbitration Public? (n 14), 535-36 (identifying ten reasons why the international investment regime is purportedly ‘public’).

elaborated in the context of sovereign immunity, that a state can act in both public and private capacities. This creates a “bright-line test” according to which “investment treaty arbitrations are public law disputes because the state acted in its public capacity when entering into the treaty, and, accordingly, liability for treaty breaches should also be understood as public.”²⁹ The seemingly clear distinction between public and private is somewhat muddied when one takes into account the existence of ‘umbrella clauses’ in many IIAs, which provide (public) treaty protection to (private) contractual obligations.³⁰

According to a second theory, termed the ‘public interest theory’, the basis of the public law analogy rests on the fact that disputes regarding both domestic public law and international investment law may involve adjudicating upon acts that “involve significant matters of public concern that transcend the private rights and obligations of the disputing parties”.³¹ Whilst there may be disagreement regarding which matters fall within this category, certain investment disputes, such as those related to the environment, human rights, or a State’s economy, clearly may have ramifications that go beyond the individual dispute.³²

A third theory, which I will call the ‘functionalist approach’, emphasises the functional similarity of the two regimes. According to this theory, international investment law is akin to public law because it imposes restraints on a State’s exercise of powers vis-à-vis private actors in much the same way that domestic public law imposes restraints on the state’s exercise of powers over those within its jurisdiction.³³ As international investment tribunals apply standards that constrain the sovereign actions of a State’s legislature, executive, and judiciary, they function in an

29 Roberts (n 3) 64-65.

30 Ibid., 65. As Roberts notes, the public v. private distinction is also complicated by the existence of stabilization clauses in contracts, which provide for compensation for certain regulatory acts.

31 Roberts (n 3) 65. See also William W Burke-White and Andreas von Staden, ‘Private Litigation in a Public Sphere:

The Standard of Review in Investor-State Arbitrations’, (2010) 35 Yale J Int L 283, 288 (“The arbitrations that we would classify as falling within the public law sphere are those in which the outcome-determinative issue in the arbitration requires a determination of the state’s power and legal authority to undertake regulation in the public interest.”)

32 Roberts (n 3) 65. For what might be considered a paradigm example, see Methanex v. U.S.A., Final Award on Jurisdiction and Merits (3 August 2005).

33 Schill, ‘Introduction’ (n 6) 17. See also, Van Harten (n 2) 4; Montt (n 4) 12-17; Stephan W Schill, ‘Deference in Investment Treaty Arbitration: Reconceptualising the Standard of Review’, (2012) 3 J Intl Disp Settlement 577, 587;

Van Harten and Loughlin (n 5) 148; Thomas Wälde & Abba Kolo, ‘Environmental Regulation, Investment Protection and ‘Regulatory Taking’ in International Law’, (2001) 50 Intl Comp Law Quarterly 811 (“Comparative constitutional law seems to provide the most suitable analogy and precedent since treaties in effect set up a similar system of higher- ranked controls over domestic law-making…”). See also the Submission of the European Union on ‘Possible Reform of investor-State dispute settlement (ISDS)’ to UNICTRAL Working Group III, 12 December 2017, UN Doc.

A/CN.9/WG.III/WP.145, para. 5 (“These public international law treaties deal with the sovereign capacity of states to regulate, by providing certain protections which are enforceable by investors. This creates a situation similar to public or constitutional law, in which individuals are protected from acts of the state and can act to enforce those protections.

It is important to recall that the state is acting in its sovereign capacity, both in approving these treaties and as regards the acts challenged.”)

analogous manner to domestic courts exercising judicial review over the acts of the executive branch of government.³⁴

Regardless which theory is adopted (and whether it is adopted wholesale or piecemeal),³⁵ the analogy with public law provides the basis for responses to a variety of systemic and substantive challenges that investment law raises.³⁶ On a general level, it acts as a normative benchmark against which one can evaluate the current system of international investment arbitration and as guidance for the development of the investment regime.³⁷ For Gus Van Harten, for example, those that adjudicate public law matters should be accountable and independent, and their decision-making should be both open and coherent. The present system of investor-state arbitration squarely fails, in his opinion, to live up to these ideals.³⁸ For others, such as Stephan Schill and Santiago Montt, the analogy with public law plays a more direct role, providing arbitrators with a repository of solutions to specific issues on which investment treaties are vague, ambiguous, or silent.

One of the challenges that public law has been called upon to address is the interpretation of provisions of a “Delphic economy of language”³⁹ that invite “an almost infinite range of arguments”.⁴⁰ The obligation to accord FET – a standard fixture in almost all investment treaties – is the prime example.⁴¹ Whilst the terms ‘fair’ and ‘equitable’ provide the interpreter with a significant degree of flexibility to account for the particularities of the case at hand, they have quite correctly been deemed to be “almost devoid of any substantial meaning”.⁴² Nor do Articles 31 and

34 Van Harten and Loughlin (n 5) 146-48 (describing the international investment system as “akin to domestic judicial review in that it keeps public authorities within the bounds of legality and provides enforceable remedies to individuals harmed by unlawful state conduct”).

35 I note that some authors recognise that certain elements of the public law analogy are valid, but do not adopt the public law analogy wholesale. Instead, they characterise the investment regime as a public/private hybrid or as a sui generis regime; see eg Roberts (n 3) 94; Alvarez, ‘Is Investor-State Arbitration Public?’ (n 14) 576; Julie Maupin, ‘Public and Private in International Investment Law: An Integrated Systems Approach’, (2014) 54 Virginia JIL 367;

Paparinskis, ‘Analogies and Other Regimes’; Zachary Douglas, ‘The Hybrid Foundations of Investment Treaty Arbitration’, (2003) 54 BYIL 151.

36 See e.g. Schill, ‘Introduction’ (n 6) 24 (calling the public law analogy the “standard methodology of thinking about issues in international investment law, both as regards the interpretation of the often vague standards of investment protection and also in addressing concerns about the institutional and procedural structure of investor-state dispute.”) See also Stephan W Schill, ‘Editorial: Towards a Normative Framework for Investment Law Reform’, (2014) 15 J World Investment & Trade 795.

37 Schill, ‘Introduction’ (n 6) 26; Van Harten (n 2) chp 7. This is termed comparison on the ‘macro’ level by Roberts and Vadi; Roberts, (n 3) 47; Vadi (n 2) chps 4 and 5.

38 Van Harten (n 2) chp 7.

39 Lemire (n 18) para. 246.

40 Roland Kläger, ‘Fair and Equitable Treatment’ in International Investment Law (CUP 2011) 3.

41 See e.g. Denmark-Ethiopia BIT, art. 3(1) (“Each Contracting Party shall in its territory accord to investments made by investors of the other Contracting Party fair and equitable treatment…”); Thailand-Argentina BIT, art. 4(1)(a) (“Investments of investors of one Contracting Party in the territory of the other Contracting Party, and also the returns therefrom, shall receive treatment which is fair and equitable…”).

42 Roland Kläger, ‘Fair and Equitable Treatment: A Look at the Theoretical Underpinnings of Legitimacy and Fairness’, (2010) 11 Journal of World Investment and Trade 435, 438. Cf. Martins Paparinskis, The International Minimum Standard and Fair and Equitable Treatment (OUP 2013) 112-14.

32 of the VCLT provide interpreters with much assistance in interpreting FET.⁴³ Tribunals have thus been left with precious little to address the “fundamental and practical question that every arbitral tribunal must answer: by what criteria, standard, or test is an arbitral tribunal to determine whether the specific treatment accorded to investments of a particular foreign investor in a given context is or is not ‘fair and equitable’?”⁴⁴

A range of methods for the operationalization of the public law analogy have been suggested. At one end of the spectrum is a “methodologically loose” use of comparative law,⁴⁵ akin to the ‘learning’ argument that is commonly invoked by advocates of the use of foreign law by domestic courts.⁴⁶ According to this argument, comparative surveys of public law may open arbitrators’ eyes to the range of interpretations of IIAs that are available, allowing them to consider how and why certain approaches have been taken in domestic systems and whether such an approach is suitable for the international level.⁴⁷ Such use of comparative law entails no obligation to follow the solution adopted by domestic law: “[c]omparative public law thus can be an eye- opener in raising awareness of possible interpretations of investment treaties without controlling that interpretation.”⁴⁸

At the other end of the spectrum is a more ambitious use of comparative law, which I term the ‘general principles method’. According to this method, the interpreter is obliged, by virtue of Article 31(3)(c) VCLT,⁴⁹ to take into account comparative surveys of domestic public law insofar as these elucidate relevant general principles of law within the meaning of Article 38(1)(c) of the Statute of the ICJ.⁵⁰ This would allow investment tribunals to concretise both the minimum and maximum levels of protection afforded by IIAs, such as developing “standards [to which]

administrative proceedings have to conform under fair and equitable treatment, or develop[ing]

43 Roberts (n 3) 51; Kläger (n 44) 438 (stating that a literal interpretation would be “doomed to failure from the outset”). See also Suez, Sociedad General de Aguas de Barcelona S.A., and InterAgua Servicios Integrales del Aguas v. Argentina, ICSID Case no ARB/03/19, Decision on Liability, 30 July 2010, para. 202 (stating that the FET obligation is “not judicially operational in the sense that they lend themselves to being readily applied to complex, concrete investment fact situations.”).

44 Suez, Sociedad General de Aguas de Barcelona S.A. (n 45) para 202.

45 Stephan W Schill, ‘Sources of International Investment Law: Multilateralization, Arbitral Precedent, Comparativism, Soft Law’, in Samantha Besson & Jean d’Aspremont (eds.), The Oxford Handbook on the Sources of Law (2017) 1107-08.

46 See eg, Justice Breyer in Norman Dorsen, ‘A Conservation between U.S. Supreme Courts Justices’ (2005) 3 International Journal of Constitutional Law 519, 523; Vicki Jackson, ‘Constitutional Comparisons: Convergence, Resistance, Engagement’ (2005) 119 Harvard Law Rev 109, 114; Ruth Bader Ginsburg, ‘Looking Beyond our Borders:

The Value of a Comparative Perspective in Constitutional Adjudication’ (2003) 40 Idaho LR 1.

47 Schill, ‘Introduction’ (n 6) 26, 33; Montt (n 4) 343-44.

48 Schill, ‘Introduction’ (n 6), 26.

49 Article 31(3)(c) of the VCLT provides: “There shall be taken into account, together with context:…any relevant rules of international law application in the relations between the parties.”

50 Schill, ‘Deference’ (n 34) 594-95; Montt (n 4) 344.

methods and thresholds for determining when non-compensable regulation turns into a regulatory taking requiring compensation.”⁵¹

For public international lawyers, the clear route of legal reasoning that runs through Article 38 of the ICJ Statute and Article 31 of the VCLT seems to provide an obvious pathway through which comparative law (with its attendant benefits) could be incorporated into investment law jurisprudence. The premise underlying this approach is that IIAs are creatures of international law and thus their implementation, interpretation, and application is controlled by the sources of law and rules of interpretation of public international law. Schill puts this clearly when he states: “given that investment treaty tribunals are constituted under international investment treaties, public international law has a controlling function for how arbitral tribunals can make use of comparative public law. They can only do so to the extent to which the applicable international legal sources leave interpretive leeway to arbitral tribunals.”⁵²

However, even amongst public international lawyers, the general principles method is contentious. In an article published in this Journal,⁵³ José Alvarez forcefully criticised the general principles method on both practical and methodological grounds, whilst also more broadly criticising the public law analogy itself.⁵⁴

From a practical perspective, Alvarez argues that the prospects of finding general principles of public law that could be relevant to investment law “would appear to be very scant indeed”⁵⁵ as “national public laws regarding property rights are notoriously context-dependent and driven by cultural and other social values.”⁵⁶ In his view, the heterogeneity of domestic laws was the very basis for the creation of autonomous investor rights in international investment law.⁵⁷ Accordingly, Alvarez argues that the drafters of IIAs must have intended treaty terms to have a meaning that is autonomous from national law, an intention that would be undermined by the adoption of the general principles method.

Methodologically, Alvarez notes that it is unclear how many jurisdictions need to be surveyed to induce a general principle, whether one could adopt a convenience sampling method (for example, on the basis of ‘legal families’),⁵⁸ and how one should account for the context in

51 Schill, ‘Introduction’ (n 6) 33.

52 Schill, ‘Deference’ (n 34) 594-95.

53 Alvarez, ‘Is Investor-State Arbitration Public?’ (n 14) 534.

54 Ibid., 535, 542-45. Alvarez himself considers to be more appropriately conceived of as a hybridized form of public and private law dispute settlement; Ibid., 540, 576.

55 Ibid., 565.

56 Ibid., 565.

57 Ibid., 566.

58 For more on the concept of ‘legal families’, see René David, Camille Jauffret-Spinosi, & Marie Goré, Les Grands Systèmes de Droit Contemporains (12th ed, Dalloz 2016); Konrad Zweigert & Hein Kötz, An Introduction to Comparative Law (3rd ed, OUP 1998) ; Neha Jain, ‘Judicial Lawmaking and General Principles of Law in International Criminal Law’,

which the domestic law operates.⁵⁹ This lack of methodological clarity opens the door to courts and tribunals to conduct superficial comparative surveys of a select group of countries, presenting an opportunity for adjudicators to mask their subjective preferences with “careless comparativism”.⁶⁰ Such an approach would, in his view, constitute a “considerable expansion of the third source in Article 38 of the Statute of the ICJ”⁶¹ that may “become a politically charged route for a de facto (and unauthorized) return to the Calvo Clause.”⁶²

Alvarez’s scepticism regarding the use of general principles in investment law has not gone unchallenged. Commenting on a previous paper published by Alvarez,⁶³ Alec Stone Sweet and Giacinto della Cananea contend that his analysis constitutes “elaborate wishful thinking”⁶⁴ that

“fails to explain actual judicial practice”.⁶⁵ The authors point to the dissemination of proportionality analysis in the courts of the European Union, the European Court of Human Rights, and the World Trade Organization, to demonstrate that general principles have moved freely between domestic and international jurisdictions without being “bound by originalism or the constraints of micro-institutional, comparative analysis” that Alvarez claims should preclude their diffusion.⁶⁶

Stone Sweet and della Cananea are right to identify the core of Alvarez’s argument regarding general principles as normative and prescriptive, rather than descriptive, and are also correct to point to the dissemination of certain general principles, such as proportionality, as evidence of the breach of such normative precepts. However, their argument aims to respond to different elements of Alvarez’s argument than the present article. Specifically, they aim to show that the intention of States parties to a treaty and inter-regime differences have not in practice precluded the spread of general principles.⁶⁷ The authors do not answer the different, but related, question of how investment tribunals use comparative law.⁶⁸ As such, whilst Stone Sweet and della Cananea’s description of the use of general principles might be valid for the principles that are the

(2016) 57 Harvard Intl L J 111, 134-37; Mariana Pargendler, ‘The Rise and Decline of Legal Families’, (2012) 60 American J Comp L 1043.

59 Alvarez, ‘Is Investor-State Arbitration Public?’ (n 14), 568. Jaye Ellis, ‘General Principles and Comparative Law’, (2011) 22 European J Intl L 955-58, 962-66.

60 Alvarez, ‘Is Investor-State Arbitration Public?’ (n 14) 569.

61 Ibid., 564.

62 Ibid., 569.

63 Alvarez, ‘Beware Boundary Crossing’ (n 14).

64 Alec Stone Sweet & Giacinto della Cananea, ‘Proportionality, General Principles of Law, and Investor-State Arbitration: A Response to José Alvarez’, (2014) 46 NYU J Intl L & Pol 911, 943.

65 Ibid., 916.

66 Ibid., 943.

67 Ibid.

68 The authors note in passing that tribunals have “largely refrained” from adducing general principles from comparative surveys of domestic law; ibid., 951.

subject of their study, it does not engage with the methodological and theoretical questions raised by the use of comparative law by tribunals.

Alvarez’s criticisms – and the debate surrounding the general principles method more generally – focus on the wrong questions by relying on idealised normative constructions of general principles and presumptions about the use of comparative law. Although the general principles method might strike international lawyers as an obvious (if not somewhat convoluted) method of incorporating comparative law into investment jurisprudence, an examination of the awards in which comparative law has been invoked shows that this is not how tribunals in fact use domestic law. Instead, the way in which tribunals use comparative law raises different theoretical and methodological questions that have not yet been addressed in the literature.

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To date, investment tribunals have principally drawn on domestic law in one of two ways.

First, in the rare instances in which the use of comparative public law has been linked to general principles of law, its use has not been justified because it manifests a general principle of law, but rather because the treaty provision being interpreted is itself derived from a general principle of law.

Such reasoning is markedly different from the general principles method described above. Second, in a number of cases, comparative public law plays an auxiliary role in the reasoning of the Tribunal, acting to confirm or support a conclusion that has been made on other grounds. Each of these uses raises different theoretical and methodological issues that will be explored in the following section.

A. Fair and Equitable Treatment as Derived from a General Principle of Law

The first strand of case law that draws on comparative public law does so in a way that is notably distinct from the general principles method propounded in the literature. These awards reason that FET is derived from the general principle of good faith, and that, because of this origin, it is justifiable to examine comparative public law in order to substantiate the content of the obligation.

The first instance of this reasoning was the Decision on Liability in Total v. Argentina,⁶⁹ in which the Claimant argued that Argentina had breached FET by frustrating its legitimate expectations. In its Decision, the Tribunal spelled out in more depth why, in its view, comparative public law was instructive when interpreting the FET obligation:

69 Total S.A. v The Argentine Republic, ICSID Case No. ARB/04/01, Decision on Liability (27 December 2010).

“In determining the scope of a right or obligation, Tribunals have often looked as a benchmark to international or comparative standards. Indeed, as is often the case for general standards applicable in any legal system (such as “due process”), a comparative analysis of what is considered generally fair or unfair conduct by domestic public authorities in respect of private firms and investors in domestic law may also be relevant to identify the legal standards under BITs. Such an approach is justified because, factually, the situations and conduct to be evaluated under a BIT occur within the legal system and social, economic and business environment of the host State. Moreover, legally, the fair and equitable treatment standard is derived from the requirement of good faith which is undoubtedly a general principle of law under Article 38(1) of the Statute of the International Court of Justice.”⁷⁰

The Total Tribunal proceeded to accept the argument that the doctrine of legitimate expectations was based on the general principle of good faith, and hence “that a comparative analysis of the protection of legitimate expectations in domestic jurisdictions is justified”.⁷¹ Acknowledging that “the scope and legal basis of the principle varies” between domestic systems, the Tribunal claimed nevertheless that “it has been recognized lately in both civil law and in common law jurisdictions within well defined limits”,⁷² citing Argentinian and English court decisions, as well as scholarly writings, as authority. However, when it came to define the scope of the doctrine, the Tribunal relied solely on secondary sources as authority for the proposition that:

“in domestic legal systems the doctrine of legitimate expectations supports ‘the entitlement of an individual to legal protection from harm caused by a public authority retreating from a previous publicly stated position, whether that be in the form of a formal decision or in the form of a representation’.”⁷³

Two subsequent arbitral awards have referred to the Total Tribunal’s Decision as authority for the proposition that comparative public law can assist in the interpretation of FET. In Toto v.

Lebanon,⁷⁴ the Tribunal cited the Total Decision as support for the assertion that “[t]he fair and equitable treatment standard of international law does not depend on the perception of the

70 Ibid., para 111 (emphasis added, citations omitted).

71 Ibid., para 128.

72 Ibid.

73 Ibid, para. 129. The secondary source from which the quote is drawn from Chester Brown, ‘The Protection of Legitimate Expectations as a “General Principle of Law”: Some Preliminary Thoughts’, (2009) 1 Transnational Dispute Management, available at <https://www.transnational-dispute-management.com/article.asp?key=1303>.

Brown himself in turn relies on the comparative surveys carried out by Jürgen Schwarze (Jürgen Schwarze, European Administrative Law (Sweet & Maxwell 2006)) and Søren Schønberg (Søren Schønberg, Legitimate Expectations in Administrative Law (OUP 2000)) to reach the conclusion that “there is only a modest amount of common ground.”

74 Toto Costruzioni Generali S.p.A. v The Republic of Lebanon, ICSID Case No. ARB/07/12, Award (7 June 2012). Note that the Tribunal also cited the Lemire v. Ukraine and Noble v. Romania Awards (mentioned below) as authority; ibid., fn 129.

frustrated investor, but should use public international law and comparative domestic public law as a benchmark [, a]s was recently also confirmed in Total S.A. v. Argentina”.⁷⁵ On the facts, however, Toto failed to adduce proof that its legitimate expectations had been breached.⁷⁶

The most recent award to refer to comparative public law – and the one that seems to be most closely aligned to the general principles method – is Gold Reserve v. Venezuela.⁷⁷ That case related inter alia the alleged breach of FET under Article II(2) of the Canada-Venezuela BIT by Venezuela. Echoing the justification given in Total, the Tribunal stated that “the legal sources of one of the standards for respect of the fair and equitable treatment principles, i.e. the protection of ‘legitimate expectations’…are to be found in the comparative analysis of many domestic legal systems.”⁷⁸ The Tribunal stated that comparative domestic law was relevant by virtue of Article 54 of the ICSID Arbitration (Additional Facility) Rules, which:

“directs ICSID tribunals to apply ‘such rules of international law as may be applicable’

unless otherwise agreed by the parties. This reference may be considered to include the

‘general principles of law recognized by civilized nations’ referred to in Article 38 of the Statute of the International Court of Justice”.⁷⁹

The Tribunal continued to cite German, French, English, Argentinian, and Venezuelan law to demonstrate that the concept of legitimate expectations operates to protect the expectations of a private person vis-à-vis their legal partner in various legal systems, “in particular when this partner is the public administration on which this private person is dependant.”⁸⁰

This strand of case law is open to criticism on several grounds. First, the Toto and Gold Reserve Awards expressly refer to the Tribunal’s Decision in Total as authority for their invocation of comparative law.⁸¹ Yet that Award does not bear close scrutiny. The paragraph of the Total Decision on which the Toto and Gold Reserve tribunals rely states that “[t]ribunals have often looked as a benchmark [of what constitutes FET] to international or comparative standards”,⁸² citing two awards as authority: the first Partial Award in S.D. Myers, Inc. v. Canada and the Award in Genin and others v. Estonia. However, when one refers back to those awards, there is neither reference to

75 Ibid., para 166.

76 Ibid., para 192.

77 Gold Reserve Inc. v Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1, Award (22 September 2014).

78 Ibid., para 576.

79 Ibid., para 575. This is not, in fact, what Article 54 of the Additional Facility Rules provides. Article 54(1)(a) of the Rules provides that, failing the designation of applicable law by the parties, tribunals shall apply “such rules of international law as the Tribunal considers applicable.”

80 Ibid., para 576.

81 NB the Gold Reserve Award incorrectly cites para 11 of the Total Award. In fact, para 11 describes procedural aspects of the case; the correct citation is to para 111.

82 Total (n 71) para 111.

comparative public law nor is there any discussion regarding its use to interpret the relevant treaty provisions.⁸³ Indeed, the Genin Award seems, if anything, to be authority for the rather different proposition that domestic law and the FET standard are autonomous, stating that “[w]hile the exact content of [the FET] standard is not clear, the Tribunal understands it to require an

‘international minimum standard’ that is separate from domestic law”.⁸⁴ The subsequent awards are seemingly oblivious to the fact that the assertion upon which their use of comparative public law is based is nothing but a juristic sleight of hand.

Second, despite the Tribunals’ attempts to justify the use of comparative public law to interpret treaty standards, their comparative surveys provide little detail as to how analogous questions are in fact dealt with under domestic law. Indeed, the Toto Tribunal failed to cite any domestic law, whilst the Total and Gold Reserve Tribunals used perfunctory surveys of comparative law to demonstrate merely that the doctrine of legitimate expectations is recognised in domestic jurisdictions.⁸⁵ As such, it would be correct to say that the comparative surveys adduced failed to shape meaningfully the Tribunals’ approach to FET or legitimate expectations, or to determine the outcome of the case.

Third, perhaps the most notable feature of these awards is the absence of any reasoning which claims that comparative public law manifests a general principle of law that is applicable by virtue of Article 31(3)(c) of the Vienna Convention. The Tribunals scarcely enquired into the commonalities that exist between domestic jurisdictions (except the general notion that legitimate expectations are protected), nor did they draw on Article 31(3)(c) of the VCLT as the basis for invoking comparative law. Instead, the reasoning pursued was essentially the inverse of the general principles method: rather than comparative public law constituting a general principle of law and thus being relevant to the interpretation of the treaty, the treaty provision’s origins as a general principle of law justified recourse to comparative public law.

This rationale for drawing on comparative law bears a close resemblance to the approach recently adopted by Campbell McLachlan and his co-authors.⁸⁶ Whilst the Tribunal in Total considered FET to be derived from the general principle of good faith,⁸⁷ McLachlan et al. consider the obligation to give “modern expression to a general principle of due process”,⁸⁸ which they understand

83 The Total Decision later cites the Noble Award as authority for the same; Total, fn 106. As noted below, the decision in Noble was not based on an analysis of comparative public law, but on the facts.

84 Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v. The Republic of Estonia, ICSID Case No. ARB/99/2, Award, 25 June 2001, para 367.

85 Total (n 71) paras 129-30.

86 Campbell McLachlan et al., International Investment Law: Substantive Principles (2^nd ed, OUP 2017).

87 Although cf ibid., §7.183, where McLachlan et al. acknowledge that tribunals have linked the doctrine of legitimate expectations to the general principle of good faith.

88 Ibid., §7.15.

to be synonymous with the “minimum requirements of the rule of law”.⁸⁹ Leaving aside the question whether FET is based on good faith, due process, or any other general principle, the authors are right to point out that “the voluntary acceptance of the principle by treaty transforms the question from one of obligation to one of content.”⁹⁰ In other words, recourse to comparative law becomes necessary to flesh out the content of FET, rather than to establish its character as a rule of law.⁹¹ As such, even if one accepts that FET is derived from a general principle, the methodological criticisms that Alvarez raises in relation to the use of comparative public law are still relevant.

B. Comparative Public Law as Auxiliary Reasoning

The abovementioned awards are exceptional in that they are the only three awards to link the use of comparative public law to general principles of law. Other tribunals have drawn on comparative law as confirmation of a conclusion reached on other grounds.⁹² Whilst not dispositive of the tribunals’ reasoning, this use of comparative law nevertheless merits close analysis. In particular, the awards raise the following question: does it matter, from the point of view of methodology or principle, that comparative law plays a merely confirmatory role, as opposed to forming the operative part of the reasoning of a tribunal?

One of the first arbitral awards to refer to comparative public law was Noble v. Romania,⁹³ in which the Tribunal was faced with the question of whether judicial insolvency proceedings constituted “arbitrary” or “discriminatory” measures that fell foul of Article II(2)(b) of the US- Romania BIT. As the Treaty gave no definition of arbitrary or discriminatory measures, the Tribunal found the definition of arbitrary treatment given by the International Court of Justice (ICJ) in the ELSI case to be instructive; namely, that an arbitrary action was “something opposed to the rule of law…[in the sense that it] is a wilful disregard of due process of law, an act which shocks, or at least surprises, a sense of judicial propriety.”⁹⁴ In light of the jobs at stake, the factual

89 Ibid., §7.16.

90 Ibid., §7.19.

91 Ibid. Cf José E Alvarez, ‘The Public International Law Regime Governing International Investment’, (2009) 344 Recueil des cours 193, 362-63 (stating that the “treatification” of investment protection does not necessarily result in increased precision).

92 One could also place the Award in Occidental v. Ecuador in this category, in which the Tribunal cited comparative public law, alongside WTO law and other international investment awards, as authority for the proposition that the principle of proportionality is relevant for investment disputes. The Tribunal only noted in passing that “[i]t is very well-established law in a number of European countries that there is a principle of proportionality” before analysing proportionality in other investment awards in depth. Occidental Petroleum Corporation and Occidental Exploration and Production Company v The Republic of Ecuador, ICSID Case No. ARB/06/11, Award (5 October 2012), paras 402-09.

93 Noble Ventures, Inc. v Romania, ICSID Case No. ARB/01/11, Award (12 October 2005).

94 Ibid., para 176, citing Elettronica Sicula S.p.A. (ELSI) (United States of America v. Italy), [1989] ICJ Rep 15, para 128.

insolvency of the company, and the likelihood of debt restructuring, the Tribunal concluded that

“there are sufficient grounds not to regard the proceedings as arbitrary”⁹⁵ and that “the proceedings were at the time the only short term solution for the ‘social crisis’”⁹⁶ that had engulfed the town in which the mill was located.

It was only after having arrived at this conclusion that the Tribunal referred to comparative law. Harking back to the definition of arbitrariness adopted by the ICJ in ELSI, the Tribunal stated that “[s]uch proceedings [i.e. the judicial insolvency proceedings at issue] are provided for in all legal systems and for much the same reasons. One therefore cannot say that they were ‘opposed to the rule of law’ … [the claimant] was in a situation that would have justified the initiation of comparable proceedings in most other countries. Arbitrariness is therefore excluded.”⁹⁷ Like the tribunal in Toto, the Noble Tribunal failed to point to any specific domestic law or comparative law study as authority for its statement.

Comparative public law played a similarly auxiliary role in the reasoning of the Tribunal in Plama v. Bulgaria. One argument advanced by the Claimant in that case was that taxes imposed by Bulgaria as the result of debt restructuring breached the FET obligation enshrined in Article 10(1) of the Energy Charter Treaty (ECT).⁹⁸ However, as Plama had not referred the matter to Bulgarian tax authorities, as required under Article 21(5) of the ECT, the Tribunal could not “see how this claim gives rise to a violation of Bulgaria’s obligations under the ECT.”⁹⁹ After it dismissed the claim on this procedural ground, the Tribunal nevertheless continued to address Plama’s argument under the FET obligation, finding that “no action by Respondent…comes anywhere near to being unfair or inequitable treatment”, as the Claimant was, or should have been, aware of the tax implications of the debt restructuring.¹⁰⁰ It was only then, after having rejected Plama’s claim on procedural grounds and on the merits, that the Tribunal noted obiter that:

“Respondent produced evidence which shows that the tax laws of many countries around the world treat debt reductions, as were negotiated in this case, as income taxable to the beneficiary…[i]t cannot therefore be said that Bulgaria’s law in this respect was unfair,

95 Ibid., para 177.

96 Ibid., para 177.

97 Ibid., para 178.

98 Energy Charter Treaty, 17 December 1994, 2080 UNTS 95.

99 Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No ARB/03/24, Award (27 August 2008) para 266.

100 Ibid., paras 267-68.

inadequate, inequitable or discriminatory. It was part of the generally applicable law of the country like that of many other countries.”¹⁰¹

A final example is the Decision on Jurisdiction and Admissibility in Lemire v. Ukraine,¹⁰² in which the Tribunal was called upon to decide if a Ukrainian regulation that required radio stations to play at least 50% Ukrainian music was a prohibited local content requirement under Article II.6 of the US-Ukraine BIT. The Tribunal accepted Ukraine’s argument that a State has the right to regulate its affairs for the public good, especially in matters related to culture or language. It noted that other countries, such as France and Portugal, had adopted similar requirements for radio stations and thus that such a measure “cannot be said to be unfair, inadequate, inequitable, or discriminatory, when it has been adopted by many countries in the world.”¹⁰³ However, the Tribunal went on to state that “this conclusion is really obiter dicta” as the Claimant had challenged the measure as a prohibited local content requirement, not as a breach of FET.¹⁰⁴ On the facts, the Tribunal found that the regulation did not have a protectionist purpose and therefore did not breach Article II.6 of the US-Ukraine BIT.

Several points regarding these awards are worthy of note. First, the tribunals’ use of comparative law does not live up to the threshold they themselves set. In both Plama and Lemire, the tribunals stated that an action could not be “unfair, inadequate, inequitable or discriminatory”

if it also existed in “many” other countries. Yet those tribunals cited, respectively, no domestic laws and the laws of just two countries. To claim that the measure at issue in those cases is in line with a significant body of domestic practice is therefore mere assertion that is unsupported by evidence. Furthermore, as a matter of principle, it is not evident why the domestic laws of other countries should affect our understanding of what constitutes a discriminatory or arbitrary measure. As has been pointed out in the context of the human rights law, deferring to the majority view of States in relation to a particular issue risks undermining the very rights that the international legal regime was established to protect.¹⁰⁵ In the context of investment law, referring to the domestic laws of “many countries” fails to protect investors’ rights if those laws are themselves arbitrary, discriminatory, unfair, or inequitable.

101 Ibid., para. 269. The Tribunal went on to reject Plama’s claim on another two grounds, noting that Plama had not adduced any evidence showing that it had actually paid the tax and that it had not shown that the tax liability precluded it from obtaining financing to reopen the plant; ibid., para. 271.

102 Joseph Charles Lemire v Ukraine, ICSID Case No. ARB/06/18, Decision on Jurisdiction and Liability (14 January 2010).

103 Ibid., para 506. Note that the Lemire Tribunal cited para 269 from the Plama Award as authority for this proposition.

104 Ibid., para 507.

105 See eg, E. Benvenisti, ‘Margin of Appreciation, Consensus, and Universal Standards’, (1999) 31 NYU JILP 843; G.

Letsas, A Theory of Interpretation of the European Convention on Human Rights (OUP 2007).

Second, as in the preceding section, none of the awards examined drew on domestic law because it constituted a general principle of law. Rather, in each case, comparative public law was drawn on because it allowed the tribunal to substantiate a standard in the relevant treaty, such as what is “arbitrary” (Noble) or “unfair, inadequate, inequitable or discriminatory” (Plama, Lemire).

The most notable feature of these awards is that the Claimant’s argument was dismissed without relying on comparative public law at all, whether on the facts (Noble, Lemire) or because of failure to fulfil procedural requirements (Plama). Comparative public law did not signal the death knell to the claimant’s argument; rather, it provided support for a decision that had already been made on other grounds.

IV. E

P

Whilst certain authors claim that tribunals should conduct a survey of domestic law from which they can induce general principles, in reality reference to comparative law is less pivotal to the reasoning of tribunals - and less methodologically rigorous – than the general principles method suggests. Examining the use of comparative law in light of tribunals’ practice puts into sharp relief questions of significant theoretical and practical complexity. This section addresses just two of the issues that are raised by tribunals’ use of comparative law: first, how might we explain why tribunals use comparative law, and, second, what methodological constraints are incumbent upon its use? This is not intended to be an exhaustive examination of the issues raised by the practice of investment tribunals; rather, it flags areas that have not yet been addressed thoroughly by the literature and may be worthy of further investigation.

A. The Interpretation of Standards

The general principles method purports both to explain why tribunals have recourse to comparative law and to normatively justify such use. From a descriptive standpoint, the cases examined in the preceding section demonstrate that tribunals’ use of comparative law cannot be explained by the general principles method. A different – and, in my view, more convincing – explanation can be given by focussing on the object of interpretation.

In each of the awards examined in the previous section, comparative law was adduced in order to interpret a standard.¹⁰⁶ In legal theory, standards are distinguished from rules on the basis

106 Ioana Tudor, The Fair and Equitable Treatment Standard in the International Law of Foreign Investment (OUP 2008) 131.

of both their form and their function.¹⁰⁷ In relation to form, the distinction drawn is between the relative determinacy of certain legal norms (rules) and the relative vagueness of others (standards).¹⁰⁸ Rules bind “a decisionmaker to respond in a determinate way to the presence of delimited triggered facts”.¹⁰⁹ The classic example given is that of a speed limit: if the driver travels faster than the permitted speed, they have violated the law. Standards, on the other hand, are vague legal directives that “collapse decisionmaking back in to the direct application of the background principle or policy to a fact situation”.¹¹⁰ Take, for example, a law requiring drivers to travel “no faster than is reasonable”.¹¹¹ Instead of referring to a particular speed, an adjudicator must take into account a range of relevant factors (driving conditions, the age and condition of the car, the presence of schools in the vicinity, etc.) to determine the level of risk that is reasonable in the case at hand. The formal difference between rules and standards is admittedly one of degree: they denote two “extremes of a continuous spectrum of ‘ruleness’, with rules representing the maximum and standards the minimum”.¹¹² Nevertheless, despite the fact that rules are “not infinitely precise and standards not infinitely vague”,¹¹³ the distinction is considered to be analytically useful.¹¹⁴

Rules and standards are also distinguished on the basis of the function that they play in the legal system. H.L.A. Hart recognised that the use of standards was one method by which a legal system could cater for the inability to anticipate with certainty scenarios that may arise in the future.¹¹⁵ In his view, standards are adopted when a legislature cannot determine a priori the interests that should be privileged in any given situation. In a similar vein, Neil MacCormick describes standards as seeking “to strike a balance that takes account of [an] apparently irreducible

107 Frederick Schauer, ‘The Convergence of Rules and Standards’, (2003) NZLR 303, 305-306 (stating that the distinction between rules and standards has “a wide currency in legal theory”). See also Duncan Kennedy, ‘Form and Substance in Private Law Adjudication’, (1976) 89 Harvard LR 1685, 1685-87; Henry M. Hart & Albert Sacks, The Legal Process: Basic Problems in the Making and Application of Law (Foundation Press 1994) 139-41.

108 Schauer (n 109) 305 (referring to the distinction between “(comparatively) specific rules and (comparatively) vague ones as the distinction between rules (specific) and standards (vague).”)

109 Kathleen M Sullivan, ‘The Supreme Court 1991 Term, Foreword: The Justices of Rules and Standards’, (1992) 106 Harvard L Rev 22, 58. See also Pierre Schlag, ‘Rules and Standards’, (1985) 22 UCLA L Rev 379, 382-83 (stating that rules have “a hard empirical trigger and a hard determinate response” and standards “a soft evaluative trigger and a soft modulated response”).

110 Sullivan (n 111) 58.

111 Russell B Korobkin, ‘Behavioral Analysis and Legal Form: Rules vs. Standards Revisited’, (2000) 79 Oregon L Rev 23. Note that this is not a mere hypothetical example: in the 1990s, Montana had a law requiring drivers to be

“reasonable and prudent”. The law was later invalidated on the grounds of vagueness; see State v. Stanko, 974 P 2d 1132 (1998).

112 Schauer (n 109) 309. See also Korobkin (n 113) 26.

113 Schauer (n 109) 309.

114 See eg Korobkin (n 113) 30; Schauer (n 109) 305.

115 HLA Hart, The Concept of Law (3^rd ed, OUP 2012) 130-31. The other option identified by Hart to address this was to delegate to administrative authorities the task of specifying what was required by the law; ibid., 131.

plurality of values”,¹¹⁶ deferring the assessment of the competing values in play to adjudication of particular cases.¹¹⁷ To illustrate, one might give the example of the standard of due care in Anglo- American negligence law, which only takes definite form when considered by an adjudicator in light of the circumstances of the case at hand. Rules, on the other hand, are characterised by the

“fact that certain distinguishable actions, events, or states of affairs are of such practical importance to us, as either things to avert or to bring about, that very few concomitant circumstances incline us to regard them otherwise.”¹¹⁸ One example is the (relatively determinate) crime of murder, which reflects the fact that few countervailing considerations would require balancing against the heinousness of killing.¹¹⁹ The determinacy of rules allows individuals to know ex ante the interests that the legal system will privilege in a certain scenario.

In the context of investment law, the form and the function of FET mark it out as a standard. The obligation is broad and indeterminate, and its adoption defers the evaluation of the myriad different factors that may be relevant to the question of what constitutes “fair and equitable” conduct to particular cases.¹²⁰ It acknowledges that the law simply cannot determine a priori which interests should take precedence in relation to certain questions.¹²¹ The fact that domestic law has predominantly been invoked to interpret a standard, as opposed to rules, raises the question whether there is something about the form or the function of those norms that justifies – or perhaps necessitates – different interpretative techniques.

Standards are commonplace in international treaties that cover a wide range of subject- matter. A review of the practice of other international courts and tribunals shows that investment tribunals are not alone in interpreting treaty standards by reference to domestic law. The

116 Neil MacCormick, Rhetoric and the Rule of Law (OUP 2005) 167.

117 Cf. Olivier Corten, ‘Motif légitime et lien de causalité suffisant: un modèle d’interprétation rationnel du «raisonnable»

(1998) Annuaire français de droit international 187, 188. Corten argues that the interpretation of ‘reasonable’ by international courts and tribunals does not automatically depend on ‘la seule subjectivité de l’interprète, mais qu’il est susceptible de faire l’objet d’un contrôle par des tiers, et ce à l’aide de jugements de fait, et non par l’affirmation péremptoire de jugements de valeurs’.

This is optimistic - Corten, for example, considers that the second stage in reasonableness analysis is the identification of a ‘legitimate reason’ for the act under review. Clearly, the qualification of an act as ‘legitimate’ or not is a subjective act, even if legitimate reasons are enumerated in the treaty provision. ibid, 189.

118 Hart (n 119) 133.

119 Ibid.

120 Cf Total, para. 107 (stating that “it is difficult, if not impossible ‘to anticipate in the abstract the range of possible types of infringements upon the investor’s legal position’”; quoting Christoph Schreuer, ‘Fair and Equitable Treatment in Arbitral Practice’, (2005) 6 Journal of World Trade 357, 365). See also Mondev International Ltd. v United States of America, ICSID Case No. ARB(AF)/99/2 (11 October 2002), para 118 (“a judgment of what is fair and equitable cannot be reached in the abstract; it must depend on the facts of the particular case. It is part of the essential business of courts and tribunals to make judgments such as these.”); Waste Management Inc. v Mexico, ICSID Case No.

ARB(AF)/00/3 (30 April 2004), para 99 (“Evidently the standard is to some extent a flexible one which must be adapted to the circumstances of each case.”)

121 Cf. Robert Y. Jennings, ‘State Contracts in International Law’, (1961) 37 BYIL 156, 180-81 (“It is perhaps also a mistaken notion to set too much store by the method of establishing minimum international standards by comparative researches into selected municipal laws.”)